Markets Update Friday 22/10/2021 – Reshuffle

Frankfurt – 22/10/2021

Reshuffle

After tech stocks clearly dominated over blue chips this week, the tide turned today: blue chips rose, while the Nasdaq suffered losses. Meanwhile, Federal Reserve Chairman Jerome Powell provided the movement with his unexpectedly clear words on tapering, i.e. the gradual reduction of the Fed’s multi-billion bond purchases. Investors thus had a whole host of news to digest.

The so-called tapering should be completed by the middle of next year if the economy develops broadly as expected. Powell thus confirmed the expectations on the financial markets and recent statements by the Fed. So far, the Fed has been pumping 120 billion dollars a month into the economy through its bond purchases. Powell also stressed that it was time for tapering to begin, but not for interest rate hikes.

Up to now, investors have hardly been impressed by such statements, according to market experts, but against the background of the price records, they are now reacting more sensitively to such news.

US Markets at a glance

The Dow Jones opened Friday’s session little changed, but by the end of trading, it had gained 0.21 per cent to 35,677.68 points. The market-wide S&P 500 index, which includes technology and standard stocks, also reached a record high of 4559 points in early business but ultimately closed below that. In the end, the index exited trading at 4544 points, a daily loss of 0.11 per cent. The tech index NASDAQ Composite, on the other hand, fell deeper into the red after having already dropped at the start. It ended the day down 0.82 per cent at 15,090.20 points.

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The weak outlook of semiconductor company Intel and a disappointing quarterly report from Snap, the operator of the photo app Snapchat, were depressing the mood of tech investors. In the wake of Snap, which lost more than a quarter of its value, Twitter, Facebook and Google parent Alphabet shares also fell.

Meanwhile, activity in the US economy picked up in October. 

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Far East Markets at a glance

In Asia, too, the major stock markets were unable to find a common denominator. In Tokyo, the Nikkei index closed with a gain of 0.34 per cent at 28,804.85 points, while the Shanghai Composite fell by 0.34 per cent to 3,582.60 units by the end of trading. In Hong Kong, however, the Hang Seng gained 0.42 per cent to 26,126.93 points.

According to insiders, the heavily indebted Chinese real estate group Evergrande gained some breathing space by paying interest due on a bond. If Evergrande had not been able to raise the money in time, a formal default would have been the result. Moderate gains on the US stock markets from the previous trading day also provided support.

European Markets at a glance

In Europe, the largest stock markets went up. The EuroSTOXX 50 started with a marginal gain, which is extended to 0.8 per cent to 4,188.81 index units by the end of trading.

The DAX 40 was ultimately quoted 0.46 per cent higher at 15,542.98 points. The TecDAX also made clear gains, ending the session 0.43 per cent up at 3,796.46 points.

According to insiders, there was some hope that Evergrande had transferred the money for a bond interest payment due to a trustee. But this is unlikely to be more than a breath of fresh air in the drama surrounding the construction group. Meanwhile, the reporting season got off to a good start, with European companies in particular reporting on their third-quarter performance on Friday.

However, worsening supply bottlenecks and concerns about a possible resurgence of the pandemic slowed the eurozone economy more than expected in October. 

Forex, gold, oil and crypto

The friendly mood on the stock markets benefited the euro for a long time before Powell’s statements pushed the greenback forward again. The European single currency gave up most of its gains, then recovered slightly and was slightly up again at 1.1641 dollars in the US trading session.

One day after the unexpectedly sharp interest rate cut in Turkey, the country’s currency continued its downward slide at high speed. In trading with the US dollar as well as the euro, new record lows were reached on Friday. At times, 9.66 liras had to be paid for one dollar and 11.25 liras for one euro, the highest prices ever. 

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After price losses in early trading, the mood on the oil market turned around, and prices managed to jump into the profit zone. North Sea Brent cost 16 cents more than the previous day at 84.76 US dollars. WTI oil from the USA rose by 14 cents to 82.64 dollars.

The price for a troy ounce of gold shot up as high as $1,813 before the US dollar gained strength again and pushed gold back to $1,793. Still, a daily gain of $10 on the troy ounce.

Cryptocurrencies, and especially the top-dogs Bitcoin and Ethereum, came under further selling pressure on Friday. BTC and ETH each lost 3.8 per cent to $60,200 and $3,950, respectively. Only two days earlier, Bitcoin had reached a new all-time high at over $67,000 and Ether rising as high as $4,380. Other major altcoins held fairly steady and hovered around their previous day’s prices. 

Corporate and world economic news

Economic data

Growth in the German economy slowed down considerably in October. Bottlenecks in intermediate products continued to be a drag in October; in addition, record-high cost pressure was a burden. According to first release data, the IHS Markit’s composite index for production in the private sector – industry and service providers combined – declined to 52.0 from 55.5 points in the previous month.

Worsening supply bottlenecks and concerns about possible corona problems also slowed the overall eurozone economy more than expected in October. The composite index for production in the private sector – industry and services combined – fell to 54.3 points from 56.2 in the previous month, the IHS Markit Institute reported in its first release. This is the lowest level in six months. Economists had only predicted a decline to 55.2 points.

The Russian central bank has reacted to the high inflation in the country with an unexpectedly big interest rate increase. The key interest rate will be raised to 7.50 per cent from the previous 6.75 per cent, the central bank announced in Moscow on Friday. Analysts had expected a rate hike, but on average, had only expected a small rate increase to 7.0 per cent. The central bank also prepared the markets for further measures. Accordingly, another rate hike is possible at the upcoming interest rate meeting, they said.

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Activity in the US economy picked up in October. IHS Markit’s composite index of private-sector production – industry and services combined – rose to 57.3 from 55.0 the previous month. The manufacturing purchasing managers’ index eased to 59.2 from 60.7 in the last month versus an expected reading of 60.5. The index for the service sector rose to 58.2 from 54.9 points, while the forecast had been for 55.5.

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